Massive payout to Pan Pharmaceuticals

The World Today - Thursday, 14 August , 2008 12:16:00

Reporter: Phillipa McDonald

ELEANOR HALL: The biggest drug recall in Australian history has today led to a massive payout by the Federal Government.

The former head of Pan Pharmaceuticals, Jim Selim, has won $50-million in damages and an extra $5-million for legal costs in his case against the Therapeutic Goods Administration.

Five years ago his company collapsed when the TGA suspended its licence and ordered the immediate recall of 219 of its products.

Reporter Philippa McDonald was at the court this morning and she joins us now.

So Philippa, why has Mr Selim been awarded this significant damages payment?

PHILIPPA MCDONALD: Well Mr Selim, by trying to sue the Federal Government for $200-million has been able to prove that the TGA actually abused its power in withdrawing its license and recalling 219 of its products. This is a settlement which has been reached after one month of hearing.

Mr Selim always thought that there'd been a vendetta waged against him by the Therapeutic Goods Administration and said by their actions it shut down his company which had a market capitalisation of $350-million.

Not only did the Therapeutic Goods Administration, he says, destroy his business in Australia, but it also did destroy his export market to 35 countries.

ELEANOR HALL: Is there any suggestion that the TGA was wrong in its assessment that the company's product were suspect? This was a major recall in 2003 wasn't it?

PHILIPPA MCDONALD: Yes, well the events of April 2003 were very dramatic.

A hundred people reported adverse effects from taking the Pan Pharmaceuticals Travacalm. In fact 19 of those people were hospitalised and that's when the TGA moved in.

Now since that happened in November 2005, Pan Pharmaceuticals actually pleaded guilty to a number of criminal offences - inflicting grievous bodily harm and manufacturing counterfeit medicines. And back in just November 2005 Pan Pharmaceuticals was fined $3-million.

Well Pan Pharmaceuticals has won its case against the Federal Government today but the TGA is holding firm and saying, look it involves a judgement for the claimant but it does not involve the Government conceding any of the specific allegations.

ELEANOR HALL: So how significant is this decision? Does it leave the way open for law suits against other government agencies?

PHILIPPA MCDONALD: Well initially it leaves the door open for thousands of shareholders who might have lost their money and hundreds of businesses who were customers of Pan Pharmaceuticals to take legal action.

More broadly, yes, the Government has found to be very much exposed if it abuses its power, which leads to the downfall, spectacular downfall, of a business as was the case in Pan Pharmaceuticals.

Now Andrew Thorpe was Jim Selim's lawyer and he made these remarks about the knock-on effects of this damages case, this massive damages case for the Government agencies.

ANDREW THORPE: I'm personally not aware of any other case in this country where the Government has accepted a claim against it for abuse of public office and payed such a large amount to a private individual.

What it means is the Government has thrown in the towel. It's accepted responsibility for what happened to Pan.

ELEANOR HALL: That's Jim Selim's lawyer Andrew Thorpe. Now Philippa, what exactly did the judge say about the nature of this abuse of power?

PHILIPPA MCDONALD: Well the judge had very little to say, that was Justice Emmett in the Federal Court, because this has been settled between the two parties.

But in terms of that allegation of abuse of power, Mr Selim's central allegation, which was the basis of his legal challenge, was that a group of public servants improperly sought to shut Pan down in a way which would prevent Pan from being able to protect itself by seeking the assistance of the Federal Court.

So he said these federal, public servants who worked for the TGA were motivated by misguided feelings of vengeance arising from a failed prosecution back in the 1990s, so they were on a course to shut him down.

ELEANOR HALL: And what was Jim Selim's reaction to the decision today?

PHILIPPA MCDONALD: Well Jim Selim is a man of few words, particularly outside the court.

He said, he issued a statement and he said he now wants a public apology from the Therapeutic Goods Authority, so he wants a public apology and he also wants the Federal Government to conduct a full inquiry with extensive terms of reference looking at the role of the TGA.

And he says what happens to him, what happened to his company, what happened to his family, must never be allowed to happen again.

ELEANOR HALL: Philippa McDonald thank you. And Philippa McDonald was at the court case in Sydney this morning on Pan Pharmaceuticals.